2.2 Deeds, Title Transfer, Title Insurance, and Recording
Key Takeaways
- A valid deed requires a competent grantor, identifiable grantee, words of conveyance (granting clause), legal description, and the grantor's signature — delivery and acceptance complete the transfer.
- Deed types differ by the warranties given: a general warranty deed offers the most grantee protection; a quitclaim deed offers none.
- Recording in the public records gives constructive notice and establishes priority, generally on a 'first to record' basis under race-notice and notice statutes.
- Title insurance protects against past defects; an owner's policy protects the buyer and a lender's policy protects the mortgagee for the loan balance.
- Title can also transfer involuntarily through descent, escheat, adverse possession, eminent domain, or foreclosure.
Essential Elements of a Valid Deed
A deed is the written instrument that transfers title to real property from a grantor (seller) to a grantee (buyer). To be valid on the exam, a deed must contain:
- A competent grantor (of legal age and sound mind) — the grantee need not be competent.
- An identifiable grantee named with reasonable certainty.
- Words of conveyance (the granting clause), e.g., "I hereby grant and convey."
- Consideration — though only a recital ("for $10 and other valuable consideration") is required.
- An adequate legal description of the property.
- The grantor's signature (the grantee does not sign the deed).
Delivery and acceptance during the grantor's lifetime complete the transfer of title. A deed found unsigned in a drawer after death conveys nothing because it was never delivered.
Types of Deeds and Their Warranties
Deeds are ranked by how much the grantor promises (warrants) about the title.
| Deed type | Protection to grantee | Typical use |
|---|---|---|
| General warranty | Highest — warrants against all defects, even before grantor owned | Standard residential sale |
| Special (limited) warranty | Warrants only against defects arising during grantor's ownership | Lenders, fiduciaries, REO sales |
| Bargain and sale | Implies grantor holds title; no express warranties | Tax/foreclosure conveyances |
| Quitclaim | None — conveys only whatever interest grantor has, if any | Clearing clouds, divorce transfers |
The key covenants in a general warranty deed include seisin (grantor owns it), quiet enjoyment (no superior claims), and warranty forever (grantor will defend title).
Trap: a quitclaim deed is fully valid and transfers whatever interest the grantor has — it is not "weaker" at transferring, it simply makes no promises. If the grantor owns nothing, the grantee gets nothing.
A buyer wants the strongest possible assurance that the seller is defending against title defects that may have existed even before the seller owned the property. Which deed should the buyer insist on?
Voluntary and Involuntary Transfer of Title
Title can change hands with or without the owner's consent.
Voluntary transfer (alienation):
- Sale or gift by deed during life.
- Devise of real property by will; bequest is personal property. A person who dies testate leaves a valid will.
Involuntary transfer:
- Descent — a person dies intestate (no will); state law of descent and distribution names heirs.
- Escheat — property passes to the state when an owner dies with no will and no heirs.
- Adverse possession — title acquired by use that is Open, Notorious, Continuous, Hostile, and Actual for the statutory period (ON-CHA).
- Eminent domain — government takes private property for public use through condemnation, paying just compensation.
- Foreclosure — a lienholder forces a sale to satisfy an unpaid debt.
Recording and Notice
Recording a deed in the county public records does not make the deed valid — a delivered, accepted deed is already valid between the parties. Recording instead gives the world constructive notice of the owner's interest and sets priority against later claims.
- Actual notice — what a person actually knows.
- Constructive notice — what a person is presumed to know because it is recorded or visible on inspection.
Most states follow a race-notice or notice rule. The exam shortcut: the person who records first generally wins, provided they took without notice of an earlier unrecorded claim.
Worked priority example: On March 1, Owner deeds to Buyer A, who does not record. On April 1, Owner fraudulently deeds the same land to Buyer B, who has no knowledge of A and records immediately. Under a race-notice statute, Buyer B wins — B recorded first and took without notice. Buyer A's remedy is to sue the seller, not to keep the land.
Trap: a possession or visible occupancy can itself be constructive notice, defeating a later buyer who failed to inspect.
Title Insurance
Title insurance protects against past defects in title — things that already happened before the policy date (forged deeds, undisclosed heirs, recording errors, prior liens). It is a one-time premium paid at closing, not an annual policy.
Two policy types are tested heavily:
| Policy | Who is protected | Coverage amount |
|---|---|---|
| Owner's policy | The buyer/owner | Purchase price (may increase over time on extended forms) |
| Lender's (mortgagee) policy | The lender | Declining loan balance only |
Key points:
- A lender's policy is usually required by the mortgagee but protects only the lender — it does not protect the buyer's equity. Buyers need a separate owner's policy for that.
- A title search / abstract of the public records produces a chain of title; the title company issues a commitment listing exceptions before insuring.
- Standard coverage excludes items not in the public record (survey issues, rights of parties in possession); extended coverage adds protection for some of those off-record risks.
Trap: title insurance covers defects that already exist, not future events — a flood or a new lien filed after closing is not covered.
At closing a buyer pays for the lender's title insurance policy required by the mortgage. Two years later an undisclosed heir from before the purchase emerges and successfully claims partial ownership, reducing the buyer's equity. Why may the buyer have no title-insurance recovery for that lost equity?
Owner's Versus Lender's Title Policy: One More Distinction
Because the difference is so heavily tested, fix these facts: the owner's policy protects the buyer for the full purchase price and generally lasts as long as the owner (or heirs) holds an interest. The lender's (mortgagee) policy protects only the lender, declines as the loan balance amortizes down, and disappears when the loan is paid off. A buyer who declines an owner's policy but accepts the lender's policy has no personal coverage - a frequent exam trap.
Standard coverage handles recorded defects (forgery, undisclosed heirs, recording errors); extended coverage adds protection for items a physical inspection or survey would reveal, such as encroachments and unrecorded liens. On the exam, if a defect could be found only by walking the land or surveying it, the answer is extended coverage.